Penalties for Airbags Defect and Fraud

One of the world’s largest suppliers of automotive safety-related equipment, agreed to plead guilty to fraud and pay a total of $1 billion in criminal penalties stemming from the company’s fraudulent conduct in relation to sales of defective airbag inflators. An indictment was also unsealed charging three Takata executives with fraud and conspiracy in relation to the same conduct.Takata Corp. has agreed to plead guilty to a single criminal charge and will pay $1 billion in fines and restitution for a years-long scheme to conceal a deadly defect in its automotive air bag inflators. The seriousness of the penalties reflect the approximate 15-year duration of the fraud, the pervasiveness of the scheme into the executive level of management and the potential risk the fraud posed to drivers and passengers.

According to the company’s admissions, in the late 1990s, Takata began developing airbag inflators that relied upon ammonium nitrate as their primary propellant. From at least in or around 2000, Takata knew that certain ammonium nitrate-based inflators were not performing to the specifications required by the auto manufacturers. Takata also knew that certain inflators had sustained failures, including ruptures, during testing. Nevertheless, Takata induced its customers to purchase these airbag systems by submitting false and fraudulent reports and other information that concealed the true condition of the inflators. This fraudulent data made the performance of the company’s airbag inflators appear better than it actually was, including by omitting that, in some instances, inflators ruptured during testing. Takata employees – including a number of key executives – routinely discussed the falsification of test reports being provided to Takata’s customers in email and in verbal communications. Even after the inflators began to experience repeated problems in the field – including ruptures causing injuries and deaths – Takata executives continued to withhold the true and accurate inflator test information and data from their customers.

Under contract law, a plaintiff can recover against a defendant on the grounds of fraudulent misrepresentation if (1) a representation was made; (2) that was false; (3) that when made, the representation was known to be false or made recklessly without knowledge of its truth; (4) that it was made with the intention that the plaintiff rely on it; (5) that the plaintiff did rely on it; and (6) that the plaintiff suffered damages as a result.

Fraud is committed when a product or service is intentionally misrepresented in an effort to deceive another party. In litigation alleging fraud, expert witnesses examine evidence to see if the elements of fraudulent misrepresentation are met. Fraud experts are knowledgeable on the federal and state criminal statutes that define whether an individual or company should be convicted of fraudulent activity.

Unauthorized use or reproduction of this site or its content is illegal. This site is the sole property of ForensisGroup, Inc. All rights reserved. Information provided is not legal or professional advice. Publisher assumes no liability in connection with the use of published information.